The Nikkei 225 rises, yen edges up, market focuses on Bank of Japan policy

Japan's stock market rebounded consecutively, with the Nikkei 225 index rising nearly 1% on Thursday (March 13), recapturing all losses from earlier in the week. There is growing attention on Japan's economic outlook and central bank policies. Meanwhile, the yen appreciated slightly, the ten-year government bond yield declined, and investors are evaluating the next moves of the Bank of Japan.

Nikkei 225 Recovers, Market Confidence Improves

On Tuesday, the Nikkei 225 index fell below the significant 36,000-point threshold, hitting a new low for the year. However, subsequent consecutive rebounds have improved market sentiment. On Thursday, the index rose by nearly 1%, successfully recovering all losses for the week, indicating a revival of investor confidence in the Japanese market.

The dollar against the yen slipped by 0.03% to 148.21, indicating a slight strengthening of the yen. Meanwhile, Japan's ten-year government bond yield decreased by 1.5%, reflecting market attention on the Bank of Japan's future monetary policy.

Prospects for Japanese Government and Central Bank Policy

Japan's Finance Minister, Katsuya Okada, said on Thursday that Japan's current economic challenge is more related to supply shortages rather than weak demand. Price increases are driven more by import costs rather than wage growth. This view strengthens expectations of a shift in Japan's economic growth model.

Currently, market expectations generally anticipate that the Bank of Japan will cumulatively raise interest rates by 50 basis points this year, with the next possible rate hike as early as the summer. Policy adjustments could impact the yen exchange rate and the trajectory of Japanese stocks, with investors closely monitoring the situation.

Investment Institutions Optimistic About Japan's Stock Market in 2025

Despite noticeable short-term market volatility, some institutions remain optimistic about the long-term prospects of Japan's stock market. Nicholas Gwee, a portfolio strategist at RBC Wealth Management, indicated that Japan's stock market growth potential primarily stems from the following factors:

• Bank of Japan is nearing its 2% inflation target, increasing the scope for policy adjustments;
• Increased investment in friend-shoring and onshoring to boost economic development;
• Higher corporate investment returns and shareholder returns, enhancing market appeal;
• Wage growth stimulates domestic demand, leading to a revival in consumption;
• Sustained strength in inbound tourism, supporting the service sector;
• Reform of personal savings accounts attracting retail funds into the stock market.

Future Outlook: Market Eyes Bank of Japan Policy Moves

Overall, the consecutive rebound of the Nikkei 225 index has bolstered market confidence, but future trends will still depend on adjustments in the Bank of Japan's policies and changes in the global economic environment. If the Bank of Japan further raises interest rates, the yen may continue to strengthen, and the flow of funds in Japan's stock market may be affected. Investors will closely watch policy developments to determine the medium- to long-term direction of Japan's market.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.